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The table below shows the number of coffees bought each day in the greater Hobart area at a variety of prices.
Price ($) Quantity 6 0 5 3000 4 6000 3 9000 2 12000 1 15000 0 18000
Calculate the price elasticity of demand for coffee when the price of coffee is $3. Carefully interpret your answer. If all coffee shops increased the price of coffee to $4, what would happen to total revenue? Explain your conclusion.
Good x and good y are food items that can be found in your local grocery store. We have the following information about the demand for each of the goods. When the price of good x rises from $0.80 to $1, the quantity of good y purchased at the grocery store rises from 60 units per week to 75 units per week. Based on this information, calculate the cross-price elasticity of demand. Carefully interpret your answer. What is the relationship between the two goods? Explain your conclusion.
The table below shows the relationship between income and the quantity demanded of good z.
Income ($) Quantity 20000 60 30000 110 40000 150 50000 180 60000 200
Calculate the income elasticity of demand when income changes from $40000 to $50000. Carefully interpret your result. Characterize the relationship between income and the quantity demanded of good z.
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Suppose that you run a tutoring service for economics students. The table below reports the demand for your services by 8 students per week. In the table are reported each student’s reservation price of a tutoring session per week. Note that each student demands at most one tutorial session per week.
In addition, the opportunity cost of your time is $29 per session. There are no competitors for your service.
Student Reservation Price ($ per session)
Number of Sessions given
Total Revenue ($ per week)
Marginal Revenue ($ per Week) A 40 1 40 40 B 38 2 76 36 C 36 3 108 32 D 34 4 136 28 E 32 5 160 24 F 30 6 180 20 G 28 7 196 16 H 26 8 208 12
A) Assume initially that price discrimination is not an option, so you charge a single price. What price are you going to charge the students to maximize your profit? How many sessions will you sell? B) Calculate consumer surplus under the single price. C) Now, suppose that you are able to practice perfect price discrimination. How many sessions will you sell to maximise profits? What is consumer surplus now?